United States

The competent authorities of the United States of America and Spain, pursuant to the Convention between the Kingdom of Spain and the United States of America on the prevention of double taxation and tax evasion in respect of income taxes, and the annexed Protocol signed in Madrid on 22 February 1990 (‘the Convention’), have reached the following agreement (‘the Agreement’) concerning the treatment of United States limited liability companies (‘LLC’), United States ‘type S’ Corporations (S Corporations) and other commercial entities considered as companies of persons (partnerships) or entities not subject to US corporation tax. This Agreement is concluded pursuant to Article 26(3) (mutual agreement procedure).

(1) Definition of the expression ‘and any other grouping of persons’ in accordance with Article 3(1)(d).

Pursuant to paragraph 4 of the Protocol, the expression ‘any other grouping of persons’ in Article 3(1)(d) (General definitions) shall be understood to include inheritances which are already registered, trusts or partnerships. The competent authorities agree that the term ‘any other group of persons’ also includes an LLC or other entity incorporated or not in the United States that is considered a partnership of persons or is not considered as an entity other than its partners for the purposes of federal taxes of the United States.

Accordingly, with regard to paragraph 4 of the Protocol, the competent authorities agree that paragraph 5(b) of the Protocol shall be interpreted as meaning that income obtained by an LLC, or other entity, whether or not incorporated in the United States, which is considered a partnership of persons, or is not regarded as an entity other than its partners for the purposes of United States federal taxes, shall be regarded as income received by a resident of the United States to the extent that the income received by that LLC or other entity is subject to taxation in the United States as income of a resident of that country. Similarly, the competent authorities agree that the income received by a public limited liability company ‘type S’ shall be deemed to be received by a resident of the United States to the extent that the income received by the public limited liability company ‘type S’ is subject to taxation in the United States as the income of a resident of that country.

For example, if a U.S. LLC, considered to be a company of persons for the purposes of U.S. federal taxes, receives a fee payment from Spain, and the U.S. LLC has two partners with equal participation in the LLC, a resident of Spain and a resident of the United States, the LLC will be entitled to benefit from the Agreement as a resident of the United States in respect of fifty per cent of the fees received, given that fifty per cent of those fees, received by the U.S. resident partner, are subject to taxation in that country.

(2) Procedure for seeking the benefits of the Convention.

(a) A United States LLC, considered as a corporation of persons for the purposes of taxation of the United States, may apply for a certificate of residence under Model 6166, in the same way as a corporation of persons. The Model 6166 shall provide evidence of the presentation by the LLC of the Model 1065 for the disclosure of income of companies of persons in the United States, including as an annex a list of members of the LLC resident in the United States on the basis of data held by the Intemal Revenue Service. The LLC shall, in turn, provide directly to the foreign retainer, in accordance with the data in its possession, information concerning the percentage of ownership of the LLC for the partners listed. For example, if a resident of the United States owns fifty percent of the LLC and a resident of Canada owns the rest, the annexed listing issued by the Intemal Revenue Service will identify the resident of the United States and the LLC will inform the Spanish retainer that that resident owns fifty percent of the ownership of the LLC.

(b) In the case of United States LLC companies structured at levels (tiered U.S. LLCs) that are considered as companies of persons for the tax purposes of that country, the benefits of the Convention and the rules governing certifications are similar to those applicable to companies of persons structured at levels.

(c) In the case of a U.S. LLC company that is not considered as an entity other than its partner for the tax purposes of that country, the LLC may apply for a Model 6166 on the basis of its nature as a branch, division or business unit of its sole-owner partner and that such sole-owner partner is resident of the United States.

(d) Similar rules apply in the case of an LLC or other entity established outside the United States, provided that the LLC or other entity is considered as a partnership of persons or is not considered as an entity other than its partner for tax purposes. The LLC may apply for a Model 6166 confirming its submission of the Model 1065 for the return of income of individual companies in the United States, and that the members listed below are residents of the United States, or that the LLC is a branch, division or business unit of its sole-owner partner and that such sole-owner partner is resident of the United States.

(e) In the event that a US public limited company chooses to be considered as a ‘type S’ public limited company for the tax purposes of that country, it may apply for a Model 6166 in a manner similar to the companies of persons. Model 6166 will confirm that the public limited liability company has submitted Model 1120S for the income declaration of the public limited liability companies ‘type S’ in the United States and will attach a list of all shareholders resident in the United States for the purposes of the Convention.

Under special circumstances, where the facts warrant further investigations and upon request to that effect by Spain, the United States will attempt to verify the veracity of the LLC's statement in relation to the distribution of income related to a specific payment.

3) Effective date.

Following its signature by both competent authorities, this Agreement shall take effect retroactively from 1 January 1998.

This Agreement shall not be effective in relation to periods prescribed by law.

Agreed between the undersigned competent authorities:

This Agreement, as provided for in paragraph (3) thereof, has been retroactively effective since 1 January 1998.

What is made public for general knowledge.

Madrid, July 23, 2009. –The Technical Secretary General of the Ministry of Foreign Affairs and Cooperation, Antonio Cosano Pérez.